Kim Nash – Fidelity IGC chair

Kim Nash and Anna Bradley are the only female IGC Chairs.  Kim’s not only IGC chair at Fidelity, she’s chair of the master trust. She’s not only chair of the Fidelity master trust , but chair of the Scottish Widows master trust (though she is about to be replaced there by Andrew Warwick Thompson).

I mention this because although I am pleased that Kim brings diversity to her varying roles, these roles necessarily conflict.  Fidelity has a marketing strategy that allows it to compete for mandates where a sponsoring employer may be choosing between Scottish Widows or Fidelity, or perhaps employing Fidelity to run a contact based or trust based plan. It’s not jus Kim, but her entire board (with the exception of one internal appointment) serving as fiduciaries on IGC and Trust board.

This situation looks like being perpetuated for the foreseeable future with the arrival of Gerald Wellesley and Dianne Day who are like Kim herself are Client Directors of their respective independent trustee firms . It may be an alphabet soup of acronyms – PTL, ITS and PSITL – but this doesn’t make for diversity of judgement, it makes for a club.

I am worried by the interchangeability of a small group of specialist professional trustees from a magic circle of trustee firms, dominating insurance company master trusts and IGCs. Fidelity is a particularly bad example and the latest appointments further concentrate the problem.  I thought the Fidelity IGC report showed an ineffective IGC and while well written and slickly presented showed no appetite to challenge Fidelity over the value policyholders were getting for their money.

The report and governance structure ring alarm bells to me and I hope that the FCA – when it comes to report on IGCs later this year, will pick up on this.

Tone and Structure

Like Ian Pittaway at Aegon, Kim Nash chooses to present herself through a video and like Ian, Kim ends up making the video a promo.  I can’t embed the video on this blog but I can offer a screenshot which (confusingly) is labelled – Master Trust Video 2

Screenshot of the IGC video.

The video is 4 minutes long and provides an overview of the value for money assessment. The only critical note is over the development of certain processes, any criticism translates into this message “still improving” while every other metric gets a big green tick.  All this against a backdrop of St Paul’s cathedral, which looks out onto Fidelity’s offices.

While I suppose this gushing style is supposed to encourage policyholders to save more, but I think it compromises the Chair and the Committee whose report has to live up to the video – sadly it does.

The main report is preceded by a two-page member summary ( a good idea). As with the video – this appears on your toolbar as a “master trust  IGC”  document

There is a section where the IGC hints at what “still improving” means

There are also some areas where we feel Fidelity has only partly met our expectations. We will be working with Fidelity in the coming year to enhance and improve your experiences. These areas are:

• Clear communications sent to you at relevant times, so you can make informed decisions about your retirement plans, with a particular focus on digital communications

• The availability of income drawdown in retirement

• Current contribution levels and how easy they are to change

• Communicating about costs and charges in pounds and pence

I like Kim’s clear style of writing, her unfussy prose and her concision. If I could forget the video, I would give the report a green for tone and structure, but I can’t – it gets an amber. As a general rule, IGC Chairs should stay away from the camera.

Effective or authoritative

Because Kim writes so well, she becomes authoritative in a way that few other chairs can. But this does not mean that either she or her IGC are effective.

The Coronavirus features in the body of the report.

We can report that the restrictions we are all having to deal with as a result of the pandemic have not affected the administration of your pension.

Fidelity , we are told , have benefited from having offices in Asia that forewarned them of the impact of Covid19. To their credit – they have kept telephone helplines in place 8am-6pm, but it’s not true to say that administration has not been affected. This is from Fidelity’s website

We’re very sorry if you experience a longer than usual wait time, we hope you understand it is a very busy period for our teams. Our client services team will be doing their best to respond as soon as possible.

Contact us by email: pensions.service@fil.com Please be aware that we’re unable to discuss account information by email. We aim to respond to emails within 2 working days.

This does not sound like world-leading customer service to me. The IGC report does not sound on top of actual experience – it sounds like it’s been fed a line.

I am really worried about the lack of product development and technology integration at Fidelity.

I see little sign that Fidelity are keeping up with the times. At a recent workshop on investment pathways, Fidelity presented their approach to delivery. There was to be no app for phones or – it seemed – any automated processes. It was as if the conversation was happening ten years ago.

Similarly , I am not convinced that Fidelity’s flagship and default investment strategy “FutureWise” is being effectively monitored. The evidence for Future Wise exceeding expectations is given in two tables, one showing absolute performance and one showing performance against certain benchmarks.

Apart from the obvious comment that these figures do not include Q1 2020, there are plenty of other worries. The comparators are inflation  and interest rates, both of which are squashed by QE, the returns are quoted gross and there is no analysis of experienced returns (using contribution histories). In short the analysis looks designed to present performance in the best light and shows policyholders little that they can hang on to as relevant to them.

There needs to be some kind of peer group benchmark in here , for the report to have any meaning, instead we are given as authority, an un-named investment consultant on who’s testing the IGC has relied. Frankly i do not find this analysis of investment value at all compelling.

I continue to be concerned by the high levels of costs within Fidelity’s self-select active funds with active equity funds average 26bps of transaction costs. Fidelity have been reporting these numbers for three years now and I’m pleased to see the transaction costs are coming down.  FutureWise now averages only 0.03% in costs, this compares to transaction costs in previous years many times this amount

“previous -2018 and revised -2019

Policyholders younger than 65 have seen transaction costs falling from 0.39% to 0.03%. That’s a huge fall but goes uncommented on. I would like to know what was going on in 2018 and 2019 and just what changed.

Space doesn’t permit me to continue challenging Fidelity, but I suspect that there continues to be a lot of papering over the cracks. I don’t feel at all happy convinced by what I’m reading and while I am pleased to see transaction costs falling, I sense a lack of transparency in the report. Coupled with the eulogistic tone of the video, I am not at all sure that the IGC is effectively challenging Fidelity and I give it an amber for its efficacy.

Value for Money Assessment

As I have been reading and re-reading the report, I have become progressively less comfortable with how information is presented and the rigour with which Fidelity appears to have been challenged.

However, the independent assessment of Fidelity through the system of net promoter scores suggests that customer satisfaction levels are improving. Fidelity only markets itself to sponsors who have substantial pension resources and consequently, contributions per member are high, meaning that Fidelity plans should be profitable to Fidelity and that Fidelity should be at the forefront of customer service.

On traditional metrics , such as accuracy of administration and telephony, Fidelity is clear an impressive organisation (despite problems today which are understandable).

But there appear to be some big deficiencies. In particular the inability of policyholders to drawdown from their workplace pensionsIn addition,

Fidelity is developing the capability to allow members to take a regular income in retirement from an existing account through income drawdown (from September 2020) without having to transfer to a new arrangement. We are monitoring progress on investment pathways and the retirement support provided around them. It will then form part of our Value-for-Money assessment in 2021.

Five years after the introduction of pension freedoms and Fidelity still don’t have an integrated drawdown service in its workplace pension.

While the Chair’s report focusses on the nice to have issues around its online portal, policyholders aren’t getting the basic requirement of a drawdown service. It would appear that an online transfer in service was developed this year, but why would someone transfer to Fidelity if there is no equivalent service to get the money back.

As I have mentioned throughout this review, I do not think that this report really asks the right questions and I don’t trust its answers. I am tempted to give the VFM assessment worse, but will stick at giving it an amber rating.